I am a registered investment advisor based in Houston Texas, specializing in equity options. My focus is naked put selling and spread trading. I have past experience in commercial banking, real estate, and oil and gas, as well as various types of other derivative investments. My world was turned upside down by the financial crisis of 2008-9. Many of my views are slanted to expose and correct the corruptions existing in the world’s financial markets. I have a BS in economics from UC Berkeley and an MBA in finance from the U of Pennsylvania Wharton School. Reach me at rbf10@comcast.net

Why Romney Lost And Republicans Keep Losing

One would have thought Mitt Romney would have cruised to a landslide victory this Tuesday past. No president had been elected with such abysmal employment numbers since FDR won in 1936. I can’t think of any president in my lifetime that has fomented greater division among the populace, spurring class warfare and widening racial divisions. Even though one of the greatest of rhetoricians, a silver tongued chameleon brilliantly malleable to weave his messages to whatever the crowd genre, it still hasn’t sunk in that he pulled off this victory. The political axiom is elections are about “jobs, the economy, jobs, and the economy.” Has anything so drastically changed to alter this equation?

Let’s travel back over the four recessions prior to the 2008-09 downturn and measure the time it took to get back to pre-recession employment levels. Courtesy of a chart prepared by J P Morgan here are some interesting statistics. The recession of 1974-76 only took 20 months to return to pre-downturn employment levels. The 1981-82 recession returned 26 months later while the 1990-91 slump fully rebounded after 32 months and the decline of 2001 recovered in 47 months. But here we are in the final months of 2012 fully 58 months after 2008-09 was officially declared a recession in December of 2007 and we are still 2.7% above pre-recession employment levels and you can’t even see any peephole of light in the tunnel. Compounding the anemia is that the “employee participation rate” is at 63.6%. Until this current malaise, from 1990 onward there was never a time when it sank below 66% and there were numerous years where the average participation rate exceeded 67%. If you “normalize” this rate at 66.5% then it would add over 4.5 million souls to the jobless rolls. It also increases the unemployment rate by 3 full percentage points.

A set of facts like these adumbrate a Romney victory. So something else must have been at work……something that made perhaps millions of voters flee. It was an election of two different business models: The Obama statist/socialist versus the smaller government capitalist ideals of Romney. I enthusiastically pulled the Romney-Ryan lever and felt confident in victory.

What Happened

The GOP has the look and feel of a theocracy. The evangelical movement has co-opted the Republican Party and given it a veneer of intolerance. It is wonderful to have strong religious beliefs, just keep them to yourself. America is a secular nation and separation of church and state is enshrined in our Constitution. That said, America is, contrary to what the president proclaims, a Christian country. From my perspective this translates that our government is founded on and our laws constructed on the Judeo-Christian ethic grounded in the Ten Commandments. It implies a tolerance and embrace for people of different cultures and different religious beliefs. When I hear a controversy about whether or not the Ten Commandments can be posted in a school or outside of some state capital building I think the point is being missed. These “laws” should be viewed as a secular gesture of what binds Americans together. However religious or agnostic one is, in addition to any religious symbolism you care to attach, the Ten Commandments is a signpost of our American culture. “In God We Trust” on our currency is not a religious endorsement but a reminder that God and the secular are not mutually exclusive. There is however a “tipping point”, a place where the religious tends to crowd out the secular and to me crosses the divide of separation of church and state.

Each speech, Republican candidates often competed for most religious, most “family values”, most pro-life. The definition of conservative has shifted from running a responsible government with a balanced budget to how many days a week you punched your attendance ticket at church. It borders on zealotry. If your credentials on abortion don’t go back at least five generations, you might be branded an apostate. In the Republican senate primary in Texas Lieutenant Governor David Dewhurst was upset by Tea Party favorite Ted Cruz. The battle was nasty and it all boiled down that Cruz was able paint Dewhurst as an establishment moderate. The evangelical movement is inflexible on the wrong issues. It is clear their votes indispensable to any successful Republican white house bid. The best way to promote “family values” is to fix the economy so more jobs are created so people have enough money to raise their families properly. Who goes to what church and how often is a measure of nothing.

Where is the party for the moderate Republican like myself? I am guided by issues like the “fiscal cliff” and how much my taxes are going up. Foreign policy is important, but at the end of the day, secondary. I don’t want to hear the word abortion ever on a campaign trail. I have three daughters so I cringe when Neanderthals like Missouri senate candidate Todd Akin are making claims that women don’t get pregnant during “legitimate” rape, whatever that means. One would think these wing nuts might have gained a smidgeon of wisdom from that example of idiocy, but sure enough Indiana senate hopeful Richard Mourdock went off and announced that pregnancy from rape must be “something God intended”. How bizarre to contemplate such a fatuous insensate guy legislating on our behalf. This medieval retrograde thinking has no place in our political dialogue….And don’t you know other Republican candidates expend massive energy to escape being painted with the same brush.

Given the demographic leftward shift of our country, sand is rapidly coursing through the hourglass for the GOP. Evangelicals must reduce their intransigence on abortion and gays. I know a couple of gays who actually cast their ballot for Romney. They held their noses and did it. Job creation and fiscal issues won out over some pretty rabidly anti-gay rhetoric…..neither had even one gay friend that voted Republican. Conversely, I listened to dinner table talk as women discuss abortion as if the election were a referendum for this single issue. Jobs or taxes were tertiary compared to the concept of losing control over basic rights over their own bodies. For so many women “choice” is the sine qua non in a government. How many hundreds of thousands or millions of women would change their vote over this one issue? Why can’t the platform be modified to say “we don’t agree with abortion, we think it is wrong but we are TOLERANT and will allow choice for women”, and then do something similar on gay rights. If the GOP wants to ever grace the presidential winners circle again, I just told them how to do it.

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This is a well written article. However I would opine that Mr. Romney lost the White House and the current Republican struggles is the message, not its communication. The rhetoric espoused by the party is full of inconsistencies, short sighted, and, at times, void of reason vis-a-vis changing economic dynamics. This, in a way, treats the electorate as if we are dumb and void of economic thought. For instance, in your analysis above, you compare this recession to recessions going back to 1974 (BTW, ’74 – ’76 was a technical recession but I would call a cumulative decline over a two year period of less than 0.8% more stagnation than recession); this is hardly a fair comparison, given the average contraction of these recessions was less than a percent. I believe you and others to the right, as well as the populace, know this to be true. Given the magnitude of where we were in 2008 isn’t the fairer comparison the period 1929 – 1933. In that period from start of recession to reaching the pre-recession GDP took 7 years. Unemployment didn’t reach pre-recession levels for 11 years. Another example is the Republican stalwart Ronald Reagan who ended his first term as President with a 7.3% unemployment rate (he was elected with a rate closer to 7.4%) after incurring a maximum rate of 10.8% TWO YEARS after he was elected. This is after inheriting an economy that has a rate of 6.3% and was growing. Combine this with the fact that every reasonable study refutes the idea of the “trickle down theory”, especially in a time when the American manufacturing base has eroded, then you get a message that is outdated and frankly suggest a concept of “I would have done better”. History suggest no one, from either party, would have done better. And therein lies the problem with the Republican message – its too often is “I am not the other guy” or “I would have done better” versus “I can do better given where we are going forward”. This would have required Romeny / Ryan to expand their discussion on their economic plan and policies beyond the veiled tax increase on the middle class (ala Reagan and the raising of social security tax thresholds). How were they going to rebuild the manufacturing base which is why we were able to bounce back from previous recessions and the primary culprit for the level of underemployed today – just shrinking government doesn’t accomplish this. How was reducing government spending not going to lead to the horrific economic contraction that we are seeing in Greece and Spain as a result of forced austerity? How can upper income tax breaks trickle down when so much investment is done abroad in low cost countries? How can we accelerate growth when ostensibly Romney / Ryan were offering an effective tax increase on the Middle Class? These are viable questions that they would / could not answer. I waited and waited for these answers and all I got was “I’m not him”. It’s insulting and the American people are smarter than this and deserve better.

Yes. In fact, the Republicans are a kind of “top down” party in almost everything. The morality police tell everyone what morality to have. The economy fixers are all about “trickle down” and politicians who do not tell the voters exactly what their plan is but say, “Trust us.” The campaign spent unbelievable amounts of money on TV ads and did not have an effective internet/facebook/twitter presence. It wasn’t just their social morality that was out of date. They were old-fashioned in every possible way.

If you were to go through an MBA program at a top university today, you would not be taught a management model where a CEO and upper management just tell everyone below what to do. The more current model is one in which management finds out what all the workers need to do their jobs more efficiently and effectively by asking them and talking with them. That’s what one does when one assumes the people doing the specific work understand it better than those who do not.

Obama is in many ways the opposite of the old-fashioned top-down guy. His campaigns clearly benefited from his background as a community organizer. He made an effort to find out what various groups of voters wanted and how he could represent their interests and needs. He kept emphasizing, “This isn’t about me; this is about you.” He made effective use of the internet, twitter, etc. And for his ground game, he typically had twice the number of offices that Romney did, so he had to pay the staff less, but they weren’t in it just for the money. They went out to get votes face to face and they kept track of what people in their area cared about.

The Republicans thought Obama was “not a leader” because he wasn’t top-down. He didn’t give Congress a pre-made detailed plan and ask them to vote on it, but gave them a set of basic goals and directions and tried to get them to negotiate among themselves. The GOP members just couldn’t hack it: they needed an authoritarian. He made an effort to find out what mail from ordinary people to his office said, and he paid attention to complaints and suggestions from ordinary people.

This is a real leader, not some guy impressed with his own importance. I keep remembering what someone from MA said about Romney as governor: he made one elevator that had been used by both the governor and legislators only for the governor’s use. Top-down. And very old-fashioned.

thank you for your well articulated response. When Obama came into office 40% of Americans received government assistance whereas today the number is over 55%. He wins votes by promising more and more largesse. Cutting governments spending in and of itself will not cure the economy. But the statist model of more and more punitive regulation on business is not the answer either. Frankly, it was the profligate spending ways of George W. Bush is the reason the country lurched so far leftward. Richard

The fact that more Americans receive government assistance is a still a function of the economic disaster that began with Republican policies. It was almost as bad as the 1929 crash, just not for everyone with massive assets. The main problem with the Bush tax cuts for the wealthy is the same as the problem with the Reagan tax cuts for them. Trickle down does not happen here. When the money is up there in the sky, it rains down in Mexico and China and even, via outsourcing, India, but not here. That is entirely reasonable.

A businessperson looks for a way to cut costs and increase profits. Labor is the most expensive cost in places with high costs of living. The pure business solution is either mechanization/computerization to eliminate as much labor as possible (which requires a serious initial outlay but offers great returns later) or to find labor in places with lower costs of living. The only industries not adversely affected in a country, then, are those which are tied to place: natural resource exploitation, construction, infrastructure, housing, education, and non-outsourceable service. But when construction and housing are adversely affected via financial manipulations such as those of the 2008 debacle, recovery is necessarily much more difficult.

I agree that the statist model is not a great one, but this is what happens when business itself keeps moving operations outside the country to increase profits radically. Big business ceases to be trusted when it uses globalism not just for expansion but for abandoning the nation.

Bush tax cuts were not only for the wealthy. They were for all taxpayers. All the statistics show when you lower capital gains rates, treasury revenues go up a lot. Regarding cost of labor, we are in a globalized world. Thats’ the way it is. That said, America through our lower enrgy costs (cheap nat.gas) has the ability to bring back a lot of oversaes manufacturing. Thanks for the discussion. Richard

Richard, one more thing. To call Obama divisive is actually laughable. It takes two (or more) to compromise and the “Party of No” did not do themselves any favors with their obstinance. I would tell you that I, and many Americans, lost faith in both parties, but especially the GOP, when the debt ceiling talks fell apart AFTER Obama and Boehner had reached a conceptual deal.

The author makes some good points, but some of the article’s nonsense — and the comments follow — just prove the point about the stupidity of the American electorate. The one that takes the cake is the poster who complained about Reagan/Bush ‘trickle down’ and then praised Clinton/Gore — as if that Tech/Internet boom wasn’t the quintessential ‘trickle down’ until the bubble burst.

The facts are that Obama got 8 MM fewer votes and if you had told me that a week ago I would be planning on attending a Romney victory parade in DC today. Instead, the GOP got fewer votes than John McCain, which is hard to believe when you compare the enthusiasm in recent weeks compared to the post-Lehman Brothers blahs the GOP had 4 years ago.

The GOP might want to recall the word LIBERAL which is what Obama is — but never called him that. A black liberal passing policies designed to appease his ghetto constituency — including the Congressional Black & Progressive Caucuses — should have been an easy bulls-eye. The GOP never mentioned it.

The GOP also never called out his foreign policy stumbles: opposing the Iraq War, then supporting it, then opposing The Surge. Obama also opposed Reagan’s Cold War victory. He also opposed the 1st Gulf War and Israel’s strike on the Osirik nuke plant. When it comes to foreign policy, the notion that Obama is Mr. Mensa is a bit far-fetched.

Add in a pro-criminal Justice Department and a pro-quota policy that should have been front-and-center to alert whites why so many black libs were supporting him (including race-baiting bigot Al Sharpton) and the GOP should have easily had 10 MM more votes than McCain.

If I had 1 MM to run ads on those issues, I would have done more than $500 MM that the GOP and all the other groups spent.

You are saying to GOP ran a very poor campaign which is 100% true. My point is despite their poor communication and campangning skills, if the GOP would just be more flexible on the issue of abortion, it would cover up a multitude of their gaffes and Romney would have won depite himself. Thanks for your comment. Richard

Either you stand with the SoCons against it, or you default to the Democrats, no third option exists. You aren’t the only one holding your nose, the SoCons, (those who did) voted GOP over the last several elections holding their nose because they considered the GOP too liberal on social issues, but hated the Dems worse. They’re ready to revolt if the GOP moves even an inch further on this, and they’re the indispensable voters in a GOP majority.